Jupai Reports Fourth Quarter and Full Year 2017 Results

PRESS RELEASE PR Newswire

Mar. 12, 2018, 04:00 AM

SHANGHAI, March 12, 2018 /PRNewswire/ -- Jupai Holdings Limited ("Jupai" or the "Company") (NYSE: JP), a leading third-party wealth management service provider, focusing on distributing wealth management products and providing quality product advisory services to high-net-worth individuals in China, today announced its unaudited financial results for the quarter and the full year ended December 31, 2017.

FOURTH QUARTER AND FULL YEAR 2017 FINANCIAL HIGHLIGHTS

Net revenues in the fourth quarter of 2017 were RMB460.0 million (US$[1]70.7 million), a 35.9% increase from RMB338.5 million for the corresponding period in 2016. For the full year of 2017, net revenues were RMB1,706.2 million (US$262.2 million), an increase of 51.3% from RMB1,127.7 million in 2016.

(RMB '000, except percentages)

Q4 2016

Q4 2016 %

Q4 2017

Q4 2017 %

YoY Change %

One-time commissions

185,294

54.8%

308,932

67.1%

66.7%

Recurring management fees

73,093

21.6%

111,430

24.2%

52.5%

Recurring service fees

25,849

7.6%

23,728

5.2%

-8.2%

Other service fees

54,267

16.0%

15,926

3.5%

-70.7%

Total net revenues

338,503

100.0%

460,016

100.0%

35.9%

(RMB '000, except percentages)

FY 2016

FY 2016 %

FY 2017

FY 2017 %

YoY Change %

One-time commissions

633,186

56.1%

1,038,704

60.8%

64.0%

Recurring management fees

260,622

23.1%

363,651

21.3%

39.5%

Recurring service fees

123,177

10.9%

105,001

6.2%

-14.8%

Other service fees

110,725

9.9%

198,806

11.7%

79.5%

Total net revenues

1,127,710

100.0%

1,706,162

100.0%

51.3%

Income from operations in the fourth quarter of 2017 was RMB63.8 million (US$9.8 million), a 32.2% decrease from RMB94.1 million for the corresponding period in 2016. For the full year of 2017, income from operations was RMB523.6 million (US$80.5 million), an increase of 77.6% from RMB294.8 million in 2016.

Net income attributable to ordinary shareholders in the fourth quarter of 2017 was RMB90.7 million (US$13.9 million), a 45.6% increase from RMB62.3 million for the corresponding period in 2016. For the full year of 2017, net income attributable to ordinary shareholders was RMB409.5 million (US$62.9 million), an increase of 97.3% from RMB207.6 million in 2016.

Non-GAAP[2] net income attributable to ordinary shareholders in the fourth quarter of 2017 was RMB101.4 million (US$15.6 million), a 41.5% increase from RMB71.7 million for the corresponding period in 2016. For the full year of 2017, non-GAAP net income attributable to ordinary shareholders was RMB454.0 million (US$69.8 million), an increase of 86.8% from RMB243.0 million in 2016.

FOURTH QUARTER AND FULL YEAR 2017 OPERATIONAL UPDATES

Total number of active clients[3]during the fourth quarter of 2017 and full year 2017 was 5,875 and 12,825, respectively.

The aggregate value of wealth management products distributedby the Company during the fourth quarter of 2017 was RMB15.8 billion (US$2.4 billion), an 8.9% increase from the corresponding period in 2016. For the full year of 2017, the aggregate value of wealth management products distributed by the Company was RMB54.3 billion (US$8.3 billion), a 19.9% increase from 2016.

Wealth management products distributed by the Company - breakdown by product type

Total assets under management[4] as of December 31, 2017 were RMB57.5 billion (US$8.8 billion), a 14.8% increase from September 30, 2017 and a 59.2% increase from December 31, 2016.

Assets under management - breakdown by product type

As of

December 31, 2016

December 31, 2017

Product type

(RMB in millions, except percentages)

Fixed income products

18,161

50%

35,558

62%

Private equity and venture capital fund products

14,971

41%

18,868

33%

Public market products

2,980

8%

2,372

4%

Other products

29

1%

734

1%

All products

36,141

100%

57,532

100%

"We are pleased to announce a set of solid results for 2017, with both Jupai's wealth management and asset management businesses growing rapidly," said Mr. Jianda Ni, Jupai's chairman of the board and chief executive officer. "Benefitting from the expansion of our business, and the increase in commission rates, our net revenues increased 51% year-over-year to RMB1.7 billion. On the bottom line, improved margins drove higher net income attributable to ordinary shareholders of RMB409.5 million, up almost 100% year-over-year compared with 2016."

"In 2017, we further enhanced our long-term competitive advantages. Leveraging our strength in the real estate industry, our high quality real-estate-related wealth management products remained popular among investors amid more conservative market sentiment. The aggregate value of products distributed by Jupai for the full-year 2017 grew to RMB54.3 billion, a 20% increase year-over-year, as total assets under management rose to RMB57.5 billion as of December 31, 2017, a 59% increase year-over-year. In line with Jupai's commitment to delivering value to our shareholders, our board has declared a cash dividend of US$0.1 per ordinary share, equal to US$0.6 per ADS. "

"Moving ahead, Jupai will continue to broaden our product selection and promote our real estate-related equity products, building upon our rigorous risk management system and rich real estate resources. We are confident that with our mature business lines, Jupai is well-positioned to achieve healthy profit growth in 2018. In addition, we believe that performance fees and new business lines such as our overseas business and insurance offerings will generate incremental profit growth in the coming year. Management will continue to strive to fulfill our customers' ever-changing investment needs, enhance Jupai's capability to achieve stable long-term growth, and build Jupai into the leading wealth and asset management brand in China."

Ms. Min Liu, Jupai's chief financial officer, said, "Jupai concluded the year with a strong performance across our business lines. As management continued to grow our business scale, we further optimized our product mix and enhanced operating efficiency, leading to a significant expansion of our net profit margin from 18% in 2016 to 24% in 2017. We remain optimistic about our bottom line growth outlook for 2018."

FOURTH QUARTER AND FULL YEAR 2017 FINANCIAL RESULTS

Net Revenues

Net revenues for the fourth quarter of 2017 were RMB460.0 million (US$70.7 million), a 35.9% increase from RMB338.5 million for the corresponding period in 2016, primarily due to increases in one-time commissions. Net revenues were RMB1,706.2 million (US$262.2 million) for the full year of 2017, an increase of 51.3% from RMB1,127.7 million in 2016.

Net revenues from one-time commissions for the fourth quarter of 2017 were RMB308.9 million (US$47.5 million), a 66.7% increase from RMB185.3 million for the corresponding period in 2016, primarily as a result of an increase in fee rate compared to corresponding period in 2016. For the full year of 2017, net revenues from one-time commissions were RMB1,038.7 million (US$159.6 million), an increase of 64.0% from RMB633.2 million in 2016.

Net revenues from recurring management fees for the fourth quarter of 2017 were RMB111.4 million (US$17.1 million), a 52.5% increase from RMB73.1 million for the corresponding period in 2016. The Company recognized RMB40.1 million (US$6.2 million) and RMB3.7 million carried interest in the fourth quarter of 2017 and 2016, respectively. For the full year of 2017, net revenues from recurring management fees were RMB363.7 million (US$55.9 million), a 39.5% increase from RMB260.6 million in 2016. RMB81.7 million (US$12.6 million) and RMB15.3 million carried interest was recognized as part of Jupai's recurring management fees for the full year of 2017 and 2016, respectively.

Net revenues from recurring service fees for the fourth quarter of 2017 were RMB23.7 million (US$3.6 million), an 8.2% decrease from RMB25.8 million for the corresponding period in 2016, primarily because the Company provided ongoing services to fewer product suppliers. We expect the net revenues from recurring service fees will continue to decline going forward. The Company recognized RMB63.7 thousand (US$9.8 thousand) and RMB1.2 million variable performance fees in the fourth quarter of 2017 and 2016, respectively. For the full year of 2017, net revenues from recurring service fees were RMB105.0 million (US$16.1 million), a 14.8% decrease from RMB123.2 million in 2016. The Company recognized RMB13.8 million (US$2.1 million) and RMB14.6 million variable performance fees for the full year of 2017 and 2016, respectively.

Net revenues from other service fees for the fourth quarter of 2017 were RMB15.9 million (US$2.4 million), a 70.7% decrease from RMB54.3 million for the corresponding period in 2016, primarily due to decreases in sub-advisory fees collected from third-party asset management companies. For the full year of 2017, net revenues from other service fees were RMB198.8 million (US$30.6 million), an increase of 79.5% from RMB110.7 million in 2016, as the related sub-advisory fees started from the third quarter of 2016.

Operating Costs and Expenses

Operating costs and expenses for the fourth quarter of 2017 were RMB396.2 million (US$60.9 million), an increase of 62.1% from RMB244.4 million for the corresponding period in 2016. For the full year of 2017, operating costs and expenses were RMB1,182.6 million (US$181.8 million), an increase of 42.0% from RMB832.9 million in 2016.

Cost of revenues for the fourth quarter of 2017 was RMB267.1 million (US$41.1 million), an 83.1% increase from RMB145.9 million for the corresponding period in 2016, primarily due to the increased number of wealth management advisors and client managers and their average compensation. For the full year of 2017, cost of revenues was RMB737.5 million (US$113.4 million), an increase of 54.6% from RMB477.0 million in 2016.

Selling expenses for the fourth quarter of 2017 were RMB82.4 million (US$12.7 million), a 27.3% increase from RMB64.7 million for the corresponding period in 2016, primarily due to increases in marketing expenses. For the full year of 2017, selling expenses were RMB282.2 million (US$43.4 million), an increase of 18.9% from RMB237.3 million in 2016.

G&A expenses for the fourth quarter of 2017 were RMB60.4 million (US$9.3 million), a 22.9% increase from RMB49.2 million for the corresponding period in 2016, mainly due to increases in both the numbers of managerial and administrative personnel and their average compensation. For the full year of 2017, G&A expenses were RMB204.1 million (US$31.4 million), an increase of 30.8% from RMB156.0 million in 2016.

Other operating income (government subsidies) received by the Company in the fourth quarter of 2017 was RMB13.7 million (US$2.1 million), a 10.7% decrease from RMB15.4 million for the corresponding period in 2016. For the full year of 2017, other operating income was RMB41.1 million (US$6.3 million), an increase of 10.0% from RMB37.4 million in 2016. Government subsidies were recorded when received and their availability and amount depend on government administrative policies.

Operating margin for the fourth quarter of 2017 was 13.9%, compared to 27.8% for the corresponding period in 2016. For the full year of 2017, operating margin was 30.7%, compared to 26.1% in 2016.

Income tax expenses for the fourth quarter of 2017 were RMB1.2 million (US$0.2 million), a 95.3% decrease from RMB26.0 million for the corresponding period in 2016. For the full year of 2017, income tax expenses were RMB123.0 million (US$18.9 million), an increase of 48.9% from RMB82.6 million in 2016. The increase was primarily due to an increase in taxable income.

Net Income

- Net Income

Net income attributable to ordinary shareholders for the fourth quarter of 2017 was RMB90.7 million (US$13.9 million), a 45.6% increase from RMB62.3 million for the corresponding period in 2016. For the full year of 2017, net income attributable to ordinary shareholders was RMB409.5 million (US$62.9 million), an increase of 97.3% from RMB207.6 million in 2016.

Net margin attributable to ordinary shareholders for the fourth quarter of 2017 was 19.7%, as compared to 18.4% for the corresponding period in 2016. For the full year of 2017, net margin attributable to ordinary shareholders was 24.0%, compared to 18.4% in 2016.

Net income attributable to ordinary shareholders per basic and diluted American depositary share ("ADS") for the fourth quarter of 2017 was RMB2.75(US$0.42) and RMB2.59(US$0.40), respectively, as compared to RMB1.93 and RMB1.85, respectively, for the corresponding period in 2016. For the full year of 2017, net income attributable to ordinary shareholders per basic and diluted ADS was RMB12.57(US$1.93) and RMB11.95(US$1.84), respectively, as compared to RMB6.46 and RMB6.20, respectively, in 2016.

- Non-GAAP Net Income

Non-GAAP net income attributable to ordinary shareholders for the fourth quarter of 2017 was RMB101.4 million (US$15.6 million), a 41.5% increase from RMB71.7 million for the corresponding period in 2016. For the full year of 2017, non-GAAP net income attributable to ordinary shareholders was RMB454.0 million (US$69.8 million), an 86.8% increase from RMB243.0 million in 2016.

Non-GAAP net margin attributable to ordinary shareholders for the fourth quarter of 2017 was 22.0%, as compared to 21.2% for the corresponding period in 2016. For the full year of 2017, non-GAAP net margin attributable to ordinary shareholders was 26.6%, as compared to 21.5% in 2016.

Non-GAAP net income attributable to ordinary shareholders per diluted ADS for the fourth quarter of 2017 was RMB2.90(US$0.45), as compared to RMB2.13 for the corresponding period in 2016. For the full year of 2017, non-GAAP net income attributable to ordinary shareholders per diluted ADS was RMB13.24(US$2.03), as compared to RMB7.26 for the same period in 2016.

Balance Sheet and Cash Flow

As of December 31, 2017, the Company had RMB1,527.8 million (US$234.8 million) in cash and cash equivalents, compared to RMB1,123.2 million (US$172.6 million) as of December 31, 2016.

Net cash provided by operating activities during the fourth quarter of 2017 was RMB161.1 million (US$24.8 million). For the full year of 2017, net cash provided by operating activities was RMB599.7 million (US$92.2 million).

Net cash provided by investing activities during the fourth quarter of 2017 was RMB144.9 million (US$22.3 million). For the full year of 2017, net cash used in investing activities was RMB74.0 million (US$11.4 million).

Net cash provided by financing activities during the fourth quarter of 2017 was RMB1.3 million (US$0.2 million). For the full year of 2017, net cash used in financing activities was RMB121.1 million (US$18.6 million).

Dividend

The Company announced today that its board of directors has approved and declared a cash dividend of US$0.1 per ordinary share. The cash dividend will be paid on or about May 31, 2018 to shareholders of record as of the close of business on April 30, 2018 (the "Record Date"). Holders of Jupai's ADSs, each representing six ordinary shares of Jupai, on the Record Date are accordingly entitled to the cash dividend of US$0.6 per ADS. The aggregate amount of cash dividends to be paid is approximately US$20 million, which will be funded by cash on the Company's balance sheet.

The determination to make dividend distributions and the amount of such distributions in any particular year will be made at the discretion of the board of directors and will be based upon the Company's operations and earnings, cash flow, financial condition and other relevant factors.

BUSINESS OUTLOOK

The Company estimates that its net revenues for the first quarter of 2018 will be in the range of RMB400 million to RMB420 million, an increase of 8.5% to 13.9% compared to the same period in 2017. This forecast reflects the Company's current and preliminary view, which is subject to change.

CONFERENCE CALL

Jupai's management will host an earnings conference call on March 12, 2018 at 8:00 a.m. U.S. Eastern Time (8:00 p.m.Beijing/Hong Kong time).

Dial-in details for the earnings conference call are as follows:

U.S./International:

+1-845-675-0437 or +1-866-519-4004

Hong Kong:

+852-3018-6771 or 800-906-601

Mainland China:

400-620-8038 or 800-819-0121

Singapore:

+65-6713-5090 or 800-101-2868

Passcode:

9273537

Please dial in 10 minutes before the call is scheduled to begin and provide the passcode to join the call.

A replay of the conference call may be accessed by phone at the following numbers until March 20, 2018:

In addition to disclosing financial results prepared in accordance with U.S. GAAP, the Company's earnings release contains non-GAAP financial measures that exclude the effects of all forms of share-based compensation and amortization of intangible assets related to acquisition. The reconciliation of these non-GAAP financial measures to the nearest GAAP measures as set forth in the table captioned "Reconciliation of GAAP to Non-GAAP Results" below.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for financial measures prepared in accordance with U.S. GAAP. The financial results reported in accordance with U.S. GAAP and reconciliation of GAAP to non-GAAP results should be carefully evaluated. The non-GAAP financial measure used by the Company may be prepared differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

When evaluating the Company's operating performance in the periods presented, management reviewed non-GAAP net income results reflecting adjustments to exclude the impacts of share-based compensation and amortization of intangible assets related to acquisition to supplement U.S. GAAP financial data. As such, the Company believes that the presentation of the non-GAAP net income attributable to ordinary shareholders, non-GAAP net income attributable to ordinary shares per diluted ADS and non-GAAP net margin attributable to ordinary shareholders provides important supplemental information to investors regarding financial and business trends relating to the Company's financial condition and results of operations in a manner consistent with that used by management. Pursuant to U.S. GAAP, the Company recognized significant amounts of expenses for the restricted shares and share options, and amortization of intangible assets related to acquisition in the periods presented. The Company utilized the non-GAAP financial results to make financial results comparable period to period and to better understand its historical business operations.

ABOUT JUPAI HOLDINGS LIMITED

Jupai Holdings Limited ("Jupai") (NYSE: JP) is a leading third-party wealth management service provider focusing on distributing wealth management products and providing quality product advisory services to high-net-worth individuals in China. Jupai's comprehensive and personalized client service and broad range of carefully selected third-party and self-developed products have made it a trusted brand among its clients. Jupai maintains extensive and targeted coverage of China's high-net-worth population.

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Jupai's strategic and operational plans, contain forward-looking statements. Jupai may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Jupai's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the goals and strategies of the Company and the Company's ability to manage its growth and implement its business strategies; future business development, financial condition and results of operations of the Company; condition of the wealth management market in China and internationally; the demand for and market acceptance of the products the Company distributes; the Company's ability to maintain and further grow its active high-net-worth client base and maintain or increase the amount of investment by clients; developments in relevant government policies and regulations relating to the Company's industry and the Company's ability to comply with those policies and regulations; the Company's ability to attract and retain quality employees; the Company's ability to adapt to potential uncertainties in China's real estate industry and stay abreast of market trends and technological advances; the results of the Company's investments in research and development to enhance its product choices and service offerings; general economic and business conditions in China; the Company's ability to protect its reputation and enhance its brand recognition. Further information regarding these and other risks is included in Jupai's filings with the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of this press release, and Jupai does not undertake any obligation to update any such information, including forward-looking statements, as a result of new information, future events or otherwise, except as required under applicable law.

[1] The U.S. dollars (US$) amounts disclosed in this press release, except for those transaction amounts that were actually settled in U.S. dollars, are presented solely for the convenience of the reader. The conversion of Renminbi (RMB) into U.S. dollars (US$) in this press release is based on the noon buying rate on December 29, 2017, as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System, which was RMB6.5063 to US$1.00. The percentages stated in this press release are calculated based on the Renminbi amounts.

[2] Jupai's non-GAAP financial measures are derived from adjusting the corresponding GAAP financial measures by excluding the effects of share-based compensation and amortization of intangible assets resulted from business acquisitions.

[3] "Active clients" for a given period refers to clients who purchase wealth management products distributed by Jupai at least once during that given period.

[4] "Assets under management" or "AUM" of Jupai refers to the amount of capital commitments made by investors to the funds managed by the Company, for which the Company is entitled to receive management fees. The amount of AUM of Jupai is recorded and carried based on the historical cost of the contributed assets instead of fair market value of assets for almost all AUM of Jupai. For assets denominated in currencies other than Renminbi, the AUM are translated into Renminbi upon their contribution, without interim value adjustments solely due to changes in foreign exchange rates. As a result, Jupai's management fees for almost all its AUM are calculated based on the historical cost balance of the AUM.